adidas-Salomon Sales Exceed Targets

Impressive Q3 sales development: North America up for the first time this year – North American Footwear backlogs positive for the first time in ten quarters

- Major working capital improvement, led by inventories

HERZOGENAURACH, Germany, Nov. 6 /PRNewswire/ — The following is being issued by adidas-Salomon:

Group sales up 6 percent, growth in all product divisions

adidas-Salomon net sales in the first nine months of 2001 increased by 6 percent to euro 4.7 billion, compared to euro 4.4 billion in the prior year. The sales increase in the third quarter was 7 percent to euro 1.8 billion, compared to euro 1.7 billion a year earlier.

adidas brand sales increased 4 percent in the third quarter to euro 1.4 billion, driving sales for the first nine months to euro 3.8 billion, a 4 percent increase year-over-year.

TaylorMade-adidas Golf increased net sales in the first nine months by 22 percent year-over-year to euro 438 million and grew 19 percent to euro 113 million in the third quarter.

Salomon sales increased by 15 percent to euro 384 million in the first nine months, boosted by strong growth in all alpine categories and higher inline skate sales in North America. Sales in the third quarter gained 23 percent to euro 221 million.

North American sales up for the first time this year

Net sales for adidas-Salomon in North America increased 1 percent in the third quarter to euro 536 million. This was the first quarter of positive sales development for the Group in the region this year and brought year-to-date performance to minus 2 percent or euro 1.4 billion.

European sales grew 8 percent in the third quarter to euro 933 million and 8 percent in the first nine months to reach euro 2.4 billion. In Asia, sales grew 17 percent in the third quarter to euro 265 million and 18 percent year-to-date to euro 693 million. In Latin America, net sales declined by 10 percent to euro 47 million for the quarter as a result of generally weaker market conditions but remained up 7 percent year-to-date versus the prior year at euro 129 million.

Gross margin at 42.8 percent

The gross margin in the first nine months of 2001 was 42.8 percent. This represents a 0.6 percentage point decline versus the previous year and was the result of currency impacts on product purchasing prices as well as the highly promotional environment in North America. In the third quarter, the gross margin for the Group decreased 1.4 percentage points to 42.0 percent.

Strict cost control contributes to operating profit improvements

Strict cost control led nine-month operating profit to rise 9 percent to euro 420 million versus euro 384 million the previous year. In the third quarter operating profit gained 4 percent to euro 222 million, compared to euro 214 million a year earlier.

IBT up 1 percent for the first nine months

Income before taxes reached euro 330 million for the first nine months of the year, compared to euro 326 million a year earlier. This represents a year-over-year increase of 1 percent and was the result of strong sales development, stable margins and strict cost control, but higher financial expenses. In the third quarter, the IBT grew 1 percent to euro 191 million versus euro 190 million the prior year.

EPS increases 4 percent year-to-date

Net income increased 9 percent in the third quarter to euro 114 million or euro 2.51 per share, compared to euro 105 million or euro 2.31 per share in the prior year. In the first nine months net income rose 4 percent to euro 184 million and earnings per share were euro 4.07, versus euro 177 million or euro 3.91 per share a year earlier.

North American Footwear backlogs currency-neutral positive for the first tiime in ten quarters

Order backlogs for the adidas brand continued to develop positively. At the end of September, orders were 3 percent above the previous year’s level on a currency-neutral basis. The backlog situation in North America improved significantly, increasing 12 percentage points to minus 1 percent versus the prior quarter on a currency-neutral basis. In particular, Footwear made significant progress, becoming positive for the first time in ten quarters. In Asia, backlogs increased 32 percent in constant currency.

Big strides made in working capital

Inventories for the Group were up less than 1 percent at the end of September versus the previous year. The inventory aging structure also developed positively. These results reflect the significant progress adidas-Salomon has already made on the management of its working capital.

At the end of September, receivables increased 8 percent versus the previous year. This was largely in line with sales increases for the Group during the third quarter.

The results recorded for the first nine months of 2001 are in line with expectations and support the full year outlook. The events of September 11, 2001 had no significant impact on the adidas-Salomon results in the third quarter. While increased market uncertainty does make future performance more difficult to predict, adidas-Salomon continues to expect consolidated sales growth of around 5 percent for 2001. The targeted 15 percent earnings increase for the current year remains unchanged and growth in all business categories will continue in 2002.

Statement from Herbert Hainer, adidas-Salomon CEO

“The impact of the events of September 11, 2001 is still being assessed throughout our Company. While it is inevitable that these events will have negative effects on the world economy and our industry, we continue to believe that we are well positioned within the market to meet our 15 percent earnings growth target for 2001 and further grow our business in 2002.”